Adult children can inherit assets from their parents when their parents pass away. Often, their parents will have written a will as part of their estate plan, or the assets will simply go through probate.
But what happens to their remaining debts? Often, these adult children may be worried that they’re somehow going to have to take on new financial obligations. If their parents pass away with $20,000 in remaining credit card debt, does that mean they inherit the debt along with the assets, and then have to pay it off?
The debt belongs to the estate
The good news is that no, adult children do not inherit debts. These remain with the estate. Just because someone’s parents have a lot of financial debt—remaining credit card bills, mortgages, loans, business loans, car loans, property taxes, income taxes, etc.—does not mean that the next generation has to handle these directly.
But because the debt is part of the estate, it does need to be addressed by the estate executor. They may have to use some of the funds held by that estate to satisfy these debts prior to distributing assets.
So if the estate contained $100,000, for example, there may only be $80,000 left to distribute to beneficiaries after the credit card bills have been paid. In this way, a parent’s debt can impact the next generation, but it is much different than passing that debt down to them directly.
Navigating probate
Debt and assets are just two parts of the probate process to be aware of. Make sure you know what legal steps to take at this time.